Audit engagements – CAS 240: Risk related to fraud
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This training activity helps to increase the understanding of fraud responsibilities in the context of an audit and to help the auditor meet the above objectives in a practical and efficient manner.
An auditor has responsibilities relating to fraud in the context of an audit. The requirements of Canadian Auditing Standards (CAS) are designed to assist the auditor in identifying and assessing the risk of material misstatement due to fraud and in designing procedures to respond to and detect such misstatements.
Misstatements in the financial statements can arise from fraud or error. The distinguishing factor between fraud and error is whether the underlying action that results in the misstatement is intentional or unintentional. As fraud is intentional and involves schemes designed to hide misstatements, the risk of not detecting a material misstatement resulting from fraud is higher than the risk of not detecting one resulting from error.
By the end of this training activity, participants will be able to:
- recognize fraud risk factors;
- identify and assess the risk of material misstatement of the financial statements due to fraud (risk assessment procedures);
- design appropriate audit procedures to address the risk of fraud;
- perform required procedures including journal entry testing;
- implement unpredictability procedures into the engagement;
- assess the results of procedures performed;
- respond appropriately to fraud or suspected fraud identified during the audit.
- Overview of CAS 240 and its related requirements
- Review of key characteristics of fraud
- Performing required risk assessment procedures
- Through discussion and examples, design audit procedures to address the risk of fraud including reviewing of journal entry testing requirements and building unpredictability into audit procedures
- Evaluate audit evidence obtained and assess impact on planned audit procedures including developing additional procedures, if required, and the audit report
- Assess the impact on the audit report
- Overview of documentation and communication requirements
This training activity will benefit practitioners in public practice who want to improve their ability to identify and assess the risk of fraud as well as those who want to strengthen the work performed and documented in the assurance files to help them meet their responsibilities related to fraud in an efficient and effective manner.